The Rise of ESG Real Estate in Japan

On January 9th, ARES- Association for Real Estate Securitization in Japan, released a news release on their survey conducted between August 25th ~ October 5th, 2017. The survey targeted Japanese pension funds, insurance, trust banks, and other institutional investors, in order to understand the current conditions of real estate investments.

<Survey Highlights>

Investors that are investing capital into real estate:

Pension funds: 58% answered yes, which is 6% increased from 2016. This number has been increasing for 5 consecutive years.

Institutional investors: over 90% answered yes.

ARES also conducted a special survey about ESG real estate investment.

When asked on investors interests in ESG investments, 16.7% pension funds answered interested, 32.1% institutional investors answered interested. When asked for their reasons for not being interested, it was noted that this was due to the fact that recognition of ESG is not enough, and as such rationales cannot be explained internally or to their beneficiaries.

This answer may indicate that while not investing into ESG, they are paying attention to its trends. As the concept is not fully understood, especially in regard to its financial performance, it is difficult for them to invest.

Though the survey was taken during the start of ESG recognition in Japan, it is interesting that 60% of the investors that were interested in ESG were well aware of the concept and answered that ESG is a way to achieve better performance in mid-term investment.

The survey was taken before GPIF’s announcement for ESG and real estate mandate. October 11th last year, they announced their partnership with World Bank Group to conduct joint research on the integration of ESG into fixed income portfolios. This is with the ultimate goal of aiming to direct more capital towards sustainable investments, and promote strategies that include environmental, social, and governance criteria in different asset class investment decisions. As GPIF is one of the strongest market leaders in Japan, many investors look to its movements for guidance. It can also be noted that since GPIF’s announcement awareness of ESG continues to grow in Japan.

If the benefits of ESG can be clearly defined with concrete case studies, there is a big chance for ESG concepts to be accepted by Japanese investors. This can be done by global leaders showing ESG concepts with proven rationales.

Asterisk is a private fund placement agency for global alternative in Japan. Through our unique and extensive network of Japanese investors, we support global fund managers in accessing Japanese and Asian institutional investors (pensions, financial institutions, real estate developers, other business companies, etc.).

We provide access and strategies for overseas fund managers to bridge the gap between them and Japanese investors.